When and why should a new business consider taking loan? @ Letzbank

If you are someone who is trying to start a new enterprise then raising funds is probably giving you sleepless nights already. There are numerous options of financing business operations like raising equity, own savings, taking help from relatives, credit cards and crowd-funding. But all these methods have their own limitations. Let us first address the factors that might necessitate availing a loan:-

·         When free lines of funding are not available;

·         Where continuous line of finance is required over an extended period;

·         Existing modes of cash flows are not enough to fund the business operations or stock inventory;

·         You are confident that business will generate enough funds to repay the business loan as and when the EMIs get due;

·         Cost of loan is really low and its benefits outweigh the disadvantages and its limitation.

Now let us move to answer the big question- why it makes sense to take loan for a start up?

1.       Tax Saving

Interest on loan can be claimed as a deductible expense from business income and thus it helps in saving tax. Therefore, effective rate of interest should be arrived after deducting the tax savings.

2.       Ownership

Many start ups end up engaging venture capitalists who invest their money in start ups and in return become part owners of the business. The advantage here is definitely the cost part which is nil but the flip side is sharing ownership for want of funds. Such sharing in ownership dilutes autonomy and may lead to many restrictions in the way operations are carried out.

3.       Hassle-free and easy

The process and procedures related to business loans have been simplified over the years. More and more lending agencies are designing and customising their loans for start ups and are readily lending them too. For more on business loans for your start up, you can visit Letzbank that offers a wide range of loans from the most trusted names in the lending sector. The comparative display gives clear visual on rate, tenure, loan amount and other processing charges being offered by lending institutions that have collaborated with letzbank.

4.       Special schemes for women entrepreneurs

These are particularly good times for women entrepreneurs to start their own dream project with loan funding. The government and numerous banks are introducing programmes and products especially built for the independent women of India. Some notable schemes that have gained popularity are Stree Shakti package by SBI, Annapurna scheme by BMB, Dena Shakti Scheme by Dena bank, Udyogini scheme from Punjab & Sind Bank, Cent Kalyani scheme run by Central Bank of India and Mahila Udhyam Scheme introduced by SIDBI. For details on these schemes and products, do read our detailed write up here .

Business loans are vital to health and sustenance of a venture, over a long period of time. They also have various advantages over other kinds of funding options. Earlier only established businesses could successfully avail business loans from reputed institutions but now the scenario has changed with changing economic progress that has been partly fuelled by start ups. This is why there could not be a better time to raise a loan for a freshly budding start up!